What happens to your retirement assets in bankruptcy?
We know from reading the news, that most of us have not saved enough to retire comfortably. The Great Recession has not helped matters–some of us have stopped contributing, some of us have had to dip into our retirement accounts to pay bills, either by cashing out or taking loans.
Often it’s this chipping away at retirement accounts that has enabled my clients to have avoided calling me. By the time they do call me, their retirement accounts are gone (or nearly gone) and my clients are again faced with the decision whether or not to file bankruptcy.
I have good news and bad news about your retirement accounts. (The bad news isn’t really bad news however, unless we discover that you would have filed have filed bankruptcy sooner and not liquidated your retirement accounts.)
The good news is that your ROTH and/or Traditional IRAs, your employer sponsored pension, and your 401K accounts are all FULLY exempt in Georgia. Exempt means that the assets are yours, and that your creditors will not be able to go after them if you file bankruptcy. This applies both to the body of the account, and your right to collect distributions if you’re already at retirement. The money is yours–and you’re going to need it. (Annuities are not treated the same as retirement accounts–call me for details).
Back to the bad news–yes, this means that when the debt collectors got you on the phone and asked you to cash in your retirement account to pay them, that you were being coerced into doing something that you shouldn’t have to do.
Congress gave us retirement accounts that are insulated from our creditors for a reason. Please don’t give into the collectors attempts to intimidate or guilt you into giving away of the few assets that is protected so strongly.
We are sometimes faced with difficult decisions in life, and no one will fault you for doing what is in the best interest of your family. If you’ve ‘been there’ with your retirement accounts, I empathize with you. I hope that you’ll call before you do anything that might jeopardize your retirement accounts. If you’ve already cashed them out, and it’s not too late, I’ll have you put the money back. If that’s not possible, I will make planning for rebuilding your retirement part of my bankruptcy counseling with you when we meet.
Here’s a link to an article published in the Wall Street Journal on March 12, 2010 about how to salvage your retirement accounts.
Call Attorney McDuffie at (404) 418 8879 to set up your consultation.